Protecting a Business Secret

Protecting a Business Secret

18.06.2008 ob 08:11

What can constitute a business secret?

Nowadays, when low business ethics is commonly present on our market, one needs to pay special attention to safeguarding the most important attributes of the company, one of which is undoubtedly a company’s business secret.

When can we talk of company’s business secret? The Companies’ Act (ZGD-1, Official Gazette of the Republic of Slovenia, No. 42/2006) (Article 39) stipulates that:

• All information designated as business secret in a company’s written decision shall be deemed as such. All partners, employees, members of the company’s bodies and other persons who are responsible for protecting a business secret shall be acquainted with this decision.

• Irrespective of whether the information has been designated a business secret in the decision from the previous paragraph, all the information which could cause considerable damage if made available to unauthorised persons shall be regarded as a business secret. Partners, employees, members of the company’s bodies and other persons shall be held responsible for leaking a business secret if they knew or should have been known of such nature of information.

• Public information or information on the breach of law or information on good business practice cannot be designated as business secret.

Article 40 of the Companies Act sets out the following with regard to protecting a business secret:

• A company determines the manner of protecting a business secret and the liability of persons responsible for protecting a business secret with a written decision from the first paragraph.

• Information deemed as a company’s business secret shall also be protected by persons outside the company if these persons knew or should have known that the said information is a business secret considering the nature of the information.

• Any action through which persons outside the company would try to gain the information regarded as business secret in contravention of the law or the will of the company shall be prohibited.

Decision on business secret

How do we go about composing a decision on a company’s business secret? If possible, it is recommendable that the company hires a suitable external expert (lawyer) because this will save a lot of time and effort as well as money as it usually becomes evident subsequently. With a written decision, a company determines what is to be regarded as a business secret (which information: e.g. information on employees, personal incomes, business partners, licences, clients, business practices, investment plans, development phases of the company, technological and development studies, etc.). There are practically no limitations as to the scope of business secrets, which implies that in principle a company has a lot of freedom in selecting what shall be deemed as its business secret. However, there is one exception to this – no information that is public pursuant to the law can be regarded as business secret.

The company’s decision must also determine a manner of protecting business secrets and the liability of persons responsible for protecting a secret. What is also important here is that persons outside the company protect information regarded as a company’s business secret if they knew or should have known that these were a business secret because of the nature of the information.

A decision on the designation of a business secret must be signed by a legal entity’s representative (director, chairman of the management board…) or his/her authorised person, or a sole proprietor or his/her authorised representative.

Adopting a decision on the designation of a company’s business secret should become a routine business procedure for entrepreneurs. It is only in this way that they could truly protect business secrets from leaking or could, in case of a leak of information, act appropriately against the infringers. However, all partners, employees, members of company’s bodies and other persons are liable in case of disclosing a business secret, in which case the sanctions can be either disciplinary, tort, and in certain cases also criminal (as stipulated by the Penal Code).